Identify the income
In a taxable account, interest, dividends, and realized gains can receive different tax treatment. Reinvesting a taxable dividend does not by itself remove the income from your return. Retirement accounts follow different rules.
Keep track of cost basis
For a sale, compare proceeds with adjusted basis and selling costs. Basis records matter when assets move between brokers or are received by gift or inheritance. Review reported information instead of assuming every brokerage figure is complete.
Review losses before trading again
A wash sale can defer a loss when substantially identical securities are acquired within the applicable period around a loss sale. Review activity across accounts, including automatic reinvestments, before using a loss in a tax projection.
A practical example
Buying shares for $4,000 and later selling for $5,000 produces a $1,000 gain before transaction costs and adjustments. The full $5,000 deposit is not the gain. Holding period and account type affect the tax result.
What to gather
- Consolidated brokerage tax statements
- Purchase, sale, and reinvestment records
- Transfer, gift, or inheritance basis records
- Prior-year capital loss carryovers
Official references
General educational information, not individualized tax, legal, or investment advice. Federal rules are summarized; state rules and your circumstances may differ. Check the rules for your tax year before acting.